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Unemployment

The unemployed are those who want and are able to work but who have no work at present. They might alternatively be described as having no work, being available for work, and looking for a job or waiting for their work to resume or begin in the near future.

The unemployed are those who want and are able to work but who have no work at present. They might alternatively be described as having no work, being available for work, and looking for a job or waiting for their work to resume or begin in the near future. For statistical purposes, Statistics Canada defines the unemployed more precisely as those who did not work in the LABOUR MARKET during the survey reference week (but may have done housework, etc), were available for work and had actively looked for work in the past 4 weeks, were on temporary layoff for 26 weeks or less and expected to be recalled by their employer, or were waiting for a new job to begin within 4 weeks.

The unemployed are thus to be distinguished from the much larger number who are employed, on their own account or by an employer, or who, unlike the employed and the unemployed, are not in the labour force. The employed have jobs, although some may be temporarily absent from work because of illness, strikes, bad weather, etc. Those not in the labour force do not want to or cannot participate in the LABOUR MARKET. They include housewives, students, retirees, etc.

Measurement

The official Canadian statistics on unemployment, as on the other categories mentioned, come from the monthly Labour Force Survey of Statistics Canada, a sample survey of some 56 000 representative households in the 10 provinces. (The Territories, Indian Reserves, the armed forces and residents of institutions are not covered.)

Some aggregative results from this survey are shown in the accompanying table. It will be seen that unemployment has risen on average since the mid-1960s, both in absolute numbers and as a percentage of the labour force (unemployment rate). The unemployment rate has not fallen below 7% since 1975, although it was consistently below that level earlier in the post-WWII period. Annual average rates of 3% to 5% were common before 1958 and from 1964 to 1969. From 1958 to 1963 and in the early 1970s, 5% to 7% rates prevailed.

Over most of the post-1975 period, employment also grew, but the labour force grew even more rapidly so that the number and fraction that were unemployed rose. In Aug 1981, employment declined, as did labour-force participation, and the fraction of the working-age population (those 15 years of age and over) that was employed. The unemployment rate rose steadily over the period to Dec 1982, reaching 12.9% seasonally adjusted (see below). This is thought to be the highest rate of unemployment since the 1930s. Similar increases in unemployment were observed in many other countries. In Canada, the rate declined to 11.1% by Dec 1983, 10.8% by Dec 1984, 9.3% by Dec 1986 and 7.9% by Dec 1987 (unadjusted; 8.1% seasonally adjusted).

Composition

The annual averages, presented above, for the labour force as a whole conceal large variations within years, between regions and among different groups of people. Regular within-year variation or seasonality occurs as a result of a periodic influx of certain groups into the labour force, eg, students during vacation, and of marked seasonal patterns in certain industries, eg, agriculture, forestry, fishing, construction and tourism, which combine to produce regular seasonal fluctuations in the levels of unemployment and employment. For Canada as a whole, unemployment is typically at about the yearly average in May, falls gradually to some 90% of the average level in Oct and then rises to about 130% in Mar. Seasonal patterns for particular regions and demographic groups differ considerably. The numbers or rates are often seasonally adjusted to eliminate these regular fluctuations and to give a clearer picture of other month-to-month changes.

Regions and demographic (age-sex) groups differ also in their typical levels (rates) of unemployment. Traditionally, Québec and the Atlantic provinces have had higher rates than Ontario and the Prairies, but since the 1981-82 recession, while this general pattern persists, there have been marked differences between the provinces in recovery. Roughly speaking, unemployment rates have declined substantially in Ontario, Québec and Manitoba and changed little in the rest of the country. Women over 25 also have somewhat higher unemployment rates than men in that age bracket. Higher unemployment rates for young people are of long standing.

The absolute differences, but probably not the percentage differences, have increased lately. Women's unemployment rates were likely lower than those of men in the 1950s and 1960s, but became higher in the 1970s as more women participated more regularly in the labour force. (Exact comparisons of detailed and pre- and post-1975 data are difficult because of substantial revisions in survey methods and definitions.) Some of the increase in overall unemployment rates in the 1970s might be attributable to the increasing number of young people and women in the labour force.

Similar differences in the incidence of unemployment exist between groups classified by occupation, industry, marital and family status, educational attainment, etc. Moreover, each of these classifications can be subdivided further (as can the age and geographic groupings), and 2 or more of them can be combined into various cross classifications.

Some of this detail is published regularly. The unemployed can also be classified by the duration of their unemployment up to the survey week, their reasons for leaving their last jobs, job search, type of work sought and activity immediately prior to looking for work. While the average duration of unemployment is short, the relatively few long spells account for a substantial, and likely increasing, share of unemployment.

Causes of Unemployment

While specific occurrences of unemployment will, of course, have a multitude of causes, some progress can be made with classifying the general phenomenon according to cause and possible remedy. The general increase in unemployment in 1981-82 and similar episodes in the past are instances of cyclical unemployment resulting from a general decline in production and economic activity. They can be remedied by measures to stimulate the ECONOMY to a higher level of performance, although such policies must clearly be influenced by other attendant circumstances (seeFISCAL POLICY; MONETARY POLICY). Thus, the preoccupation with INFLATION was almost certainly responsible for the reluctance of the authorities in Canada and elsewhere to embrace such policies to deal with the 1981-82 recession. It is also true, however, that economists have become less sanguine as to how easily the economy can be stimulated and at what cost to other objectives.

The seasonal unemployment, discussed above, is one of the components of frictional unemployment, a result of the normal operation of an economy. Other elements are contributed by the need to search for suitable jobs from time to time even when work is readily available. Thus, even when the economy operates at full capacity, there is always a positive level of frictional unemployment, although there may be offsetting job vacancies. This must be so as long as the detailed composition of economic activity alters, firms start up and go out of business, people change jobs, enter and leave the labour force, move, etc. The unemployed are not a fixed collection of individuals but an ever-changing group, most of whom might be unemployed only briefly.

There is some evidence that the "normal" or average level of frictional unemployment has increased in the 1960s and 1970s, not only because of the demographic changes already noted and discussed further below but also because of changes in social legislation and possibly for other reasons. In particular, the major increases in the generosity of unemployment insurance (seeEMPLOYMENT INSURANCE) in 1971 are said by a number of critics to have induced higher unemployment by making idleness and job search less costly and thus encouraging longer and less intensive search, greater readiness to change jobs and more seasonal and otherwise intermittent work. These trends may by now have been reversed by later amendments to the scheme.

Some have also pointed to higher minimum wages as leading to more difficulty for the relatively unskilled and unproductive in obtaining both work and on-the-job training. This last consideration made things especially difficult for new entrants, particularly the young. These were in any event experiencing difficulties because an unusually large number of them - a result of a bulge in births - ended their schooling and entered the labour force during the 1960s and early 1970s, putting pressure on the economy's capacity to absorb new, inexperienced workers. Youth unemployment rates have always been higher than the average - it is hardly surprising that the initial and early job searches should be more extensive - but they rose relatively over this period. That inflow has since declined.

Some observers, notably Martin Feldstein, have interpreted this experience as the joint result of most N American schooling providing poor preparation for the world of work and the scarcity of on-the-job training, in part because of high minimum wages. In consequence, much of the work available to young people without special training was dead-end and monotonous. Employment instability and frequent unemployment resulted.

Measures to reduce frictional unemployment might include the provision of job market information and employment services, easing the transition from school to work, eg, by subsidizing on-the-job training, redesign of educational and social policies, removal of barriers to entry into particular occupations, etc.

A final type of unemployment, more likely to be of long duration, is structural, that is, inherent in the structure of the economy itself. This is the result of a mismatching between the skills, location and other characteristics of job seekers and available jobs. Other causes of structural unemployment are technological changes, shifting product demands or a decline in a regional industry, such as the textile industry in the EASTERN TOWNSHIPS of Québec or the petroleum industry of the West in the mid-1980s. It might be remedied by provision of training and retraining, of mobility grants to workers and industries, of public or subsidized employment, etc.

As well as reducing unemployment, it is possible to ease its burden by providing insurance, welfare and other transfer payments or work sharing schemes. Some argued that since, recessions aside, unemployment is chiefly frictional, and prolonged or repeated unemployment is borne chiefly by secondary earners in families, the burden might not be great in any event. But this interpretation is contentious.